Lending Tree Stock Analysis: Money Matchmaking for a World Consumed by Debt

This article was written by Zachary Shipman, a financial Analyst at I Know First

LendingTree Stock Analysis 

“It is not an easy task to benefit customers, lenders, and shareholders simultaneously, but we are doing it.” Doug Lebda – Chairman, CEO, and Founder of LendingTree. 


  • LendingTree- Money Matchmaking
  • Full-Year 2016 and Q1 2017 Results
  • Market Trends within the Industry
  • Conclusion & I Know First Algorithmic Prediction

lending tree stock

(Source: Linkedin/LendingTree)

LendingTree- Money Matchmaking

Lendingtree Inc. (TREE), was established on April 14th, 2008. Doug Lebda is the Founder of LendingTree. Mr.Lebda created LendingTree after noticing how inefficient the mortgage loan market operated. TREE is engaged in operating an online loan marketplace for consumers seeking loans and other credit offerings. The company’s online marketplace provides consumers with access to an assortment of lenders (Network Lenders), including mortgage loans, home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, personal loans, student loans, small business loans and other related offerings.

In addition, the company offers tools and resources, including free credit scores that aid comparison shopping for these loans and other credit-based offerings. The company offers its products in categories, including mortgage products and non-mortgage products. Since its inception, LendingTree has facilitated more than 65 million loan requests. LendingTree provides access to its network of over 500 lenders offering home loans, home equity loans/lines of credit, reverse mortgages, personal loans, auto loans, small business loans, credit cards, student loans and more.

The company partners with lenders throughout the United States to provide geographic lending coverage. Consumers seeking mortgage loans through the online marketplace will likely receive multiple offers from various lenders. LendingTree refers to this activity as the “matching process”. Lending companies will compete against each other for the consumer’s potential loan. This is a great way for the consumer to take advantage of the free market by getting the best available rate. This process is completely free for consumers, while lenders pay a fee to operate within the LendingTree marketplace.

Full-Year 2016 and Q1 2017 Results

Full-year returns offered optimism for the future of LendingTree. The company recorded consolidated revenue of $384.4 million which represents an increase of $130.2 million, or 51%, over revenue in the full year of 2015. Net income from continuing operations of $31.2 million, or $2.44 per diluted share. Record adjusted EBITDA of $69.8 million increased $29.0 million, or 71%, over full-year 2015. Total loan requests in the quarter of 4.1 million grew 57% compared to fourth quarter 2015.

Revenue from mortgage products of $55.4 million represents an increase of 18% over fourth quarter 2015. Record revenue from non-mortgage products of $45.4 million in the fourth quarter represents growth of 45% over the fourth quarter 2015 and comprised 45% of total revenue. Additionally, home equity revenue rose by 134% over the fourth quarter 2015 and marked its eight consecutive quarter of sequential growth. More than 4.3 million consumers have now signed up for free credit scores and savings alerts through My LendingTree, and the revenue contribution from My LendingTree achieved record levels in the month of January.

The company makes a lot of its money from people searching for mortgages, but increasingly, it is getting a larger fraction of its sales from non-mortgage products. Mortgage-related revenue increased 14% year over year to $62.9 million in the first quarter, while non-mortgage revenue soared 75% to $69.6 million. Because of its faster growth, non-mortgage products now account more than half (53%) of LendingTree’s total revenue, up from 42% last year.


(Source: ideamensch) pictured above: Doug Lebda, Founder, Chairman, and CEO of LendingTree Inc.

“Throughout 2016 our team excelled at managing the business through a multitude of headwinds affecting several of our largest categories. Not only did we deliver outstanding financial results, growing revenue 51% and adjusted EBITDA by 71%, our accomplishments in the fourth quarter and throughout the year are fully aligned with our long-term strategy,” said Doug Lebda, Chairman and CEO.

Revenue in 2017 is anticipated to range from $535 – $545 million, representing growth of 39% – 42% over full-year 2016 and an increase from prior guidance of $500 – $520 million. Variable Marketing Margin is anticipated to be $180 – $185 million compared to prior guidance of $175 – $185 million. Adjusted EBITDA is estimated to range from $95 – $99 million, up 36% – 42% over full-year 2016 and an increase from prior guidance of $93 – $97 million.

“Our success in the first quarter provides a fantastic start to the year and gives us even more confidence in LendingTree’s ability to grow despite changing and dynamic consumer credit markets,”said Doug Lebda, Chairman and CEO.

Market Trends within the Industry

Online loans provide a quick and easy way for individuals or businesses to receive cash. Recently, an embrace of online banking and e-commerce means that LendingTree is in a prime position to succeed. More lenders are increasing their advertising spending on digital platforms. On average they charge 2-3 times more than a bank. However, the loan companies are much more likely to say ‘yes’ to a potential consumer. Online loan companies also complete their transactions much quicker than a bank. Instant gratification allows individuals or small business owners the ability to continue to support themselves in times of need. My LendingTree has apps available for both Apple’s iPhone/iOS and Google’s Android operating systems, providing meaningful assistance at users’ fingertips. The My LendingTree app makes it easy to comparison shop mortgages, personal loans and credit cards.


Another factor in the online loan industry is the abundance of students with startling amounts of student debt. Nearly two-thirds (63.3%) of millennials graduated, or will graduate, with student debt, and 46.5% currently owe money on their student loans. The burdens of student debt, however, extend far beyond just the borrowers, implicating education, occupations, spending and the economy. The average employed millennial has a salary of approximately $48,000 before taxes. However, when factoring in taxes, Social Security, and insurance, a typical millennial would net roughly 70% of their gross income. Consequently, payment towards student loan debt would consume approximately 11.3% of the average millennial’s net income each month.

The average millennial student debt payment is $317 a month. This amount can be crippling for young workers, which makes receiving loans an intriguing short-term solution. Consequently, this makes the millennial demographic a prime target for lending companies to exploit. LendingTree can help these new consumers by offering them the best possible rates.

LendingTree offers a unique service that operates well with the modern young consumer. Millennials are comfortable pursuing online resources. As a result, LendingTree has access to a profitable current and future consumer demographic.

Conclusion & I Know First Algorithmic Prediction

Online banking and e-commerce have paved the way for LendingTree to progress financially. They offer a money matchmaking service that makes it simple and cost-effective for consumers. The lenders are the ones that incur the fees, while the consumer ends up with the best possible deal on the free market. This makes LendingTree a low-risk and valuable tool for anyone looking to acquire a loan for various reasons.

LendingTree has achieved impressive results over the last calendar year. These results offer optimism for the future direction of the company. Additionally, it doesn’t appear that LendingTree has fully tapped its market opportunity, either. LendingTree estimates it has just 2% market share in its core market. A market of U.S. financial-service companies which spends $12.1 billion in online ad spending annually. “Frost and Sullivan forecast that spending on digital ads by financial-services companies will grow by a compounded 13.8% annually between 2014 and 2020, there’s a lot of opportunity still for sales to head higher,”- Todd Campbell of Motley Fool. LendingTree is targeting at least $800 million in sales for 2020, and that works out to compounded annual growth of 15% or more.

Large amounts of debt can be very overwhelming to many millennials. LendingTree can capitalize on this demographic with further marketing towards the student debt sector. This will allow the company to reach its full potential and grow long-term as a stock.

Over the last yearly cycle, LendingTree’s stock price has increased by approximately 129%.


(Source:Nasdaq) Pictured above: Yearly TREE stock fluctuation from (05/19/16) to (06/19/17)

I Know First Algorithm Bullish Forecast For TREE


I Know First maintains a bullish long-term stance on TREE. LendingTree has a signal strength of 589.74 and predictability of 0.53 for the 1-year forecast. Both the signal strength and predictability of TREE improve greatly based on the long-term forecast. LendingTree is a strong investment for the future.

Past I Know First Success with TREE


I Know First has been bullish on TREE in past forecasts. On May 4th, 2017, TREE was included in I Know First’s Fundamental High PEG Stocks Package. The package contained a forecast length of 1 month. During this time frame TREE was the top performing prediction with a return of 16.37%.

This bullish forecast on TREE was sent to current I Know First subscribers on May 4th, 2017.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm, allowing the user to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above in order to fill confident about/trust the signal.